Paper: Private Sector Loans Triggered Financial Crisis, Not Fannie Or Freddie

McClatchy:

As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Read the whole story: McClatchy

Comments

[iambusto]

The banks have lended relentlessly to deadbeats over the last decade. Thats a failure of their Risk Department. Thats the problem.

What part of this do people not understand?

[Carolab]

No. The lenders inflated the value of homes they were approving. Appraisers did as they were told and "magically" appraised the values at whatever the loan called for. The markets were severely inflated in order to inflate the value of the stock. Subprime loans were made not just to "deadbeats" but were pushed onto people even if they qualified for prime loans. They made the interest rate deliberately low and downpayments low or zero to attact people to the subprimes. The lenders were writing loans to speculators who were not only investing in properties but speculators were also investing in the derivatives market on which these mortgages were based. The underwriting rules were "relaxed" in order to generate capital flow to the banks who could then turn around and borrow money on these mortgage-backed securities and push more loans and sell those off as well to generate even more capital.

[KillTheMessenger]

Pssst... don't tell anyone... but you are not supposed to bid for a home what the appraiser tells you but what YOU think it is worth and WHAT YOU CAN AFFORD. If you bid more, you are nothing but a sucker.

[Birdman]

Good article it illuminates the issues, where things went wrong and why. It also shows that the conservative talking heads are again wrong about what caused the problem. It wasn't Fannie or Freddie, it was all the other non bank institutions like Ameriquest who have no regulations or were able to use loopholes in the law to make bad loans and sell them to unsuspecting investment banks. Sort of reminds me of the Savings and loan issue when that blew up due to lack of regulation and unscrupulous business people made bad decisions and bad investments. Funny how we keep repeating history.

[Carolab]

Savings and loan scandal = JOHN MCCAIN. Go to www.keatingeconomics.com

[Tanyars5]

Finally, the truth is coming out. The media neeeds to bring more of this to light. I am black and have made several posts to the fact that I am disturbed how the some people in the media are making claims that black poor people are responsible for the collaspse of the whole housing market. This is an absurd claim and it is going unchallenged by the media. I am black and frustrated that no one is challenging the talking heads on their stupid claims.

[BuckeyeGal]

Loudly blaming the victims, classic Rep way to shift culpability.

[Zeje]

Don't expect the media to shed more light on this.

[Tanyars5]

why????????

[Shabba]

The real problem is the compensation structure of executives in these banks. Basing huge bonuses on short term results caused these executives to take bigger and bigger risks because the benefits to them were immense. I guarantee that if bonuses could be taken back later these executives would have taken less risk.

[dhertzfe]

This article is completely false and partisan. This is not what Bush, McCain and Palin have been telling us for the past three weeks. We all know that the Republicans and the McCain campaign wouldn't lie or put out false ads.

[dadw5boys]

THE ARTICLE IS CORRECT !!!

The lies are that banks and investment banks went around Fannie and Freddie to buy these over valued loans. Fannie and Freddie have standards with checks and balances. They only held 4 % in bad loans before the Fed forced them to assmue the bad paper from failing banks and Lehmans.

[BuckeyeGal]

dhertzfe was being sarcastic, dad.

[Birdman]

Good one gave me a chuckle but I doubt most will see the sarcasm

[dadw5boys]

The only answer is higher interest rates and higher taxes. Or you can just keep digging till it all falls apart and caves in on us all. Of course the wealthy will live in Eroupe or on the 99,000 ac Bush Ranch in Paraguay with the Bush Elite !

[Carolab]

If the elite have their way we will have one world government and chips instead of currency.

[ErnestineBass]

That's how I see thing developing, Carolab.

[BluePride]

But, Sarah says it's Obama's fault!
republican pirates pillage and plunder:

http://www.youtube.com/watch?v=AZsLva3C4pU

but seriously: We DON'T Need Another HERO!

http://www.youtube.com/watch?v=VKVBq4VbC6w

[TimmySlagle]

Obama refused to regulate Fannie and Freddie

Democrats claimed there was nothing wrong:

http://www.youtube.com/watch?v=hN31-nKndg8

[Birdman]

Did you read the article? The problem WASN'T Fannie or Freddie.

[Carolab]

And, furthermore, it was McCain's lobbyists, mainly Rick Davis, that pushed Congress to keep Fannie-Freddie weakly regulated by an office called Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development (HUD). It was a cash cow because they got to set their own budgets. Who ran Congress during this time? Republicans. Who finally got some stricter regulation? Democrats. The bill that McCain supposedly wrote in 2006 to regulate, first of all wasn't his bill. It was Chuck Hagel's bill, called the Federal Housing Enterprise Regulatory Reform Act of 2005. Second, McCain didn't co-sponsor it until 18 months after it was introduced. And his co-sponsorship consisted solely of a speech on the Senate floor. Third, it was held up in committee by Republican Rick Santorum, until it finally died. They were trying to make it look like they cared about "regulation" and could have passed the bill but they were faking it. The bill was also a "bad bill" because it was meant to transfer any remaining oversight FROM the government TO an INDEPENDENT Agency! That meant it would have had NO FEDERAL OVERSIGHT AT ALL! Which means it would have been COMPLETELY deregulated. So why would Obama support a bill to do that? It would have made the problem even worse!

[KateinAZ]

People, it was the insurance swaps that tanked the whole economy. Unregulated "insurance" sold back and forth with no money to back up the paper. There is a lot more here than just bad loans. There is fraud and greed and NO ONE was doing their jobs. If you really feel it necessary to blame any one my vote is for Saint Ronnie and his deregulatory mantras. It was Reagan who said that Americans would just have to lower their standard of living. Well it took several years but the ruling class has finally done it!

[dadw5boys]

Regean robbed the Equity from all the program the American People had built up over the years and handed it out as tax cuts.
All the extra money for roads and bridges was used to off set tax cuts. All the extra money in the Social Sercurity Trust Funds was and IS NOW being used to off set tax cuts.

REGEAN WAS A THIEF!! HE STOLE THE EQUITY JUST LIKE THESE CON MEN HAVE DONE IN THIS ECONOMIC CRISIS !

[Carolab]

Yes, and the BOOMERS (my generation) paid DOUBLE into social security so that we not only paid for our parents' retirement but also we prepaid for our own. AND THEN IT WAS ALL STOLEN FROM US!

[ShakeYourComplacency]

The article mentioned Bush gloating about high home ownership. I do remember that, I remember the expression on his face, his defensive stance, his comeback to anyone who dared suggest that Americans were experiencing hardship. He would fire back about the percentage of people who owned homes. That shut them up, right? It shouldn't have, of course, but it shut the reporters up. Anyone with a brain knew then as we know now that "owning" a home really meant that the bank owned it, and you got to live in it. It was a false indicator of prosperity that Bush used to throw around.

Another false indicator? Jobs. Remember how he'd boast about the low unemployment rate? Well, reporters have yet to debunk that one. We all know of course, that the rate is low because we are forced to work 2 jobs, not one, and because unemployment benefits are yanked from people as soon as possible to get the number down.

[TimmySlagle]

" the rate is low because we are forced to work 2 jobs, not one"

Please explain to me how everyone working two jobs, changes the unemployment rate.

[Birdman]

I beleive he was saying that to indicate that the jobs that are available are a type that are minimum wage, which forces many into working two jobs, IE the job creations were on the low end of the economic scale.

[feo]

Right-wing blatherheads have only two tales to tell: 1) it's either Bill Clinton's fault or it's Jimmy Carter's fault and 2) it's because of low-income (i.e. minority) borrowing. It is well known that all Republicans are merely trying to follow the example set by Jesus and would never do anything improper.

[TimmySlagle]

Interesting.

Why just a couple weeks ago, you were all blaming Fannie and Freddie deregulation by Republicans for the crisis. Now all of a sudden, Fannie and Freddie had nothing to do with the problem (outside of the 200 billion dollar bailout, of course).

Why the change? Could it be that it's now coming out that Republicans DID want to regulate those institutions? And they were thwarted by Democrats who were using them to rob the taxpayers?

Here's a letter signed by John McCain begging Bill Frist to do something about Fannie and Freddie:

http://www.humanevents.com/article.php?id=28973

Please note: Obama's signature is not on the document. He must have voted "present."

[dadw5boys]

It is the banks that want Fannie and Freddie out !!!!!!

They want to regain the control of who gets to buy a home and where they get to buy a home !

[TimmySlagle]

You're right.

They want to make sure, that people who take out mortgages, can afford to repay them.

What's wrong with that?

[Carolab]

I didn't catch this before--but you are right. I watched a Heritage Foundation presentation on C-Span in 2003 and they were dissing Fannie and Freddie and saying that they were inefficient and couldn't continue to be under government control. And, I said to myself--oh I see, the banks want to take over real estate.

[dadw5boys]

Fannie and Freddie only held 4 % in bad loans till the Fed forced them to assume the bad paper from failing banks and investment houses !!!!!!

[TimmySlagle]

Failing banks and investment houses took on many of those bad loans under threats from the Clinton Administraion, ACORN, and other Democrat institutions. They were assured that Fannie and Freddie would buy them.

[RobinSeattle]

Human Events *snicker.

Actually, I wasn't blaming Fannie and Freddie for this crisis at all. So that is just another lame GOP talking point.

But it is true that lack of regulation resulted in this crisis and the talking point about their troubles being related to minority loans was batted down like somebody trying to drive the lane on Bill Russell.

That is always the GOP's default position: blame it on minorities.The fact that your presidential candidate is fond of using a word that is anathema to both Indochinese-Americans and Korean-Americans bespeaks how bigotry is as much a part of the Republican raison d'etre as cheese is of a Mexican diet.

[TimmySlagle]

Human Events *snicker.

ad hominem "sigh."

Do you really think attacking the messenger negates the message?

[dadw5boys]

REPUBLICANS HAD THE 60 VOTES NEEDED TO PASS ANY REGULATION !!!!!!!!!!

IT WAS NOT FANNIE AND FREDDIE !!!!!

IT WAS REPUBLICAN CON MEN LIKE BUSH'S BUDDY AT COUNTRY WIDE !!!!!

DUDE !

wake up !

[TimmySlagle]

"REPUBLICANS HAD THE 60 VOTES NEEDED TO PASS ANY REGULATION"

When?

[RatgurlSD]

So you get your information from a right wing blog? How about trying a neutral, unbiased site. Factcheck.org comes to mind. So does Snopes.

There's nothing wrong with reading your biased sites, but double-check their validity by visiting an unbiased source if you're going to cite them.

[TimmySlagle]

"So you get your information from a right wing blog?"

Um, I'm here on the Huffington Post. I actually spend more time here, than I do on Human Events. Unlike you, I'm not opposed to looking at both sides of an argument before I formulate an opinion.

If you HAD checked the link, you would have seen a scan of the actual letter to Bill Frist, demanding regulation of FM FM, signed my John McCain, and unsigned by Barack Obama.

[Carolab]

www.mediamatters.org

[dadw5boys]

COUNTRY WIDE AND THE OTHERS ADVERTIZING LOW HOME RATES WERE THE PROBLEM !!!!

THEY COMMITED COLLUSION WITH PROPERTY APPRAISERS TO OVER VALUE HOMES BY 30% !!!

THEN THEY COMMITED FRAUD TO PACKAGE AND SELL THE LOANS TO INVESTMENT BANKS !!!!!!

DOING THAT 3 TIMES OR MORE IS OPERATING A CRIMINAL ENTERPRIZE !!!!!!

[totalliberal]

Settle down old guy. Turn off the caps lock.

[dadw5boys]

SETTLE DOWN ??????

MY KIDS FUTURE IS BEING RAPED HERE !!!!!!!!!

I WILL NOT SETTLE DOWN !!!!!!!!!

[TimmySlagle]

They also got away with it, because they had bribed Chris Dodd, Democrat head of the Senate Banking Committee.

[Bongborg]

Hobble away, Tiny Tim. Liars don't get Christmas goose.

[dadw5boys]

Dude it take 60 votes.

The Republicans had ruled Congress 14 years and still do till we get 60 votes.

[Carolab]

And you know what? They were carrying more than one loan on these properties as well.

[jmndodge]

The private loans are the smoke screen, the problem is with the credit defaults. Hence the bailout has little to nothing to do with the "bad loans", (Only the difference between what they can afford and what they owe would be required for that bailout) but a great deal to do with the unregulated financial industry. Here we are transferring many billions of taxpayer dollars to the large corporations who have mis-managed their investor resources. This is not going to be quick, easy, or painless.

[totalliberal]

Canada's banks were voted safest in the world and most secure. They have no need for any government bail-out whatsoever. Guess why? Regulations.

Did you hear that Ronnie Reagan and all the rest of you d*mb republicans.. "Regulations". No face on Mt. Rushmore for you.

[almoguy]

After the dot com bubble burst, my modest savings took a hosing and when GWB was elected, I took what was left of my money and bought Loonies, at that time worth .49 cents to the USD. My thinking was that here was a country that has vast resources and a non aggressive government that was truly altruistic. It seemed like a safe haven for my hard earned dollars. As of yesterday the Loonies was trading at 1.17 USD. Do the math. Canada is a sane country.

[Carolab]

I wonder what will happen when the Amero replaces the peso, the dollar and the Loonie.

[Bongborg]

Actually, I think it would be appropriate if we had W's naked a$$ carved on Mt. Rushmore.

[TheJibreelaMonsters]

George is that you... George Sours that is

[Carolab]

At least get his name right. George SOROS.